By James Zhang
(Singapore, May 27, 2020) A Singapore-based fintech is calling on local companies to join a pledge that helps SMEs get their invoices paid on time so that they can survive the COVID-19 slowdown.
To showcase those companies which have joined the pledge, RIABU, the Singapore-based social fintech, has launched Pledge2Pay.sg.
“We are calling on large companies with the cash reserves and staying power to survive the crisis, to help Singapore SMEs”, said RIABU Managing Partner and founder Mark Laudi.
“All we are asking is that when they purchase products and services from SMEs that they settle their invoices within thirty days.”
Laudi told Fortune Times in a recent interview that SMEs are often paid late by their customers, frequently much larger companies. Although most SMEs stipulate payment terms (e.g. 30 days, net monthly) when they sell on credit to a customer, these terms are often not met.
“The challenge for SMEs is that if they are constantly paid late, they may lack the cash to invest in growth, or even to meet payroll. Many have been forced to borrow at high rates to plug the gap,” he said, noting that since SMEs provide a majority of employment – all over Asia – it is important that they are able to survive and provide jobs, and that their customers pay when they have agreed to pay.
Statistics show that SMEs make up 99% of registered companies in Singapore, accounting for just under half of economic output (45%), and employ almost 3-in-4 Singapore residents (72%).
However, in 2019, it took an average 42 days for SMEs to get paid in Singapore. Average terms were 29 days, indicating that more than 40% of invoices were paid late, Laudi said.
“This has gotten worse in 2020 as a result of the COVID-19 impacts on business. Note that this is an average but that actual terms vary widely from industry to industry, ranging from COD (cash on delivery) to as much as 120 or 180 days from invoice,” he added.
Laudi said Pledge2Pay is a free initiative for both customers and suppliers. There is no fee to pledge, call-to-pledge, or give kudos.
Commenting on how RIABU makes a profit from the pledge, he said: “If we can encourage large customers to pay their invoices on time it will help SMEs immensely to meet their monthly overhead commitments. Everybody benefits.”
Victor Mills, Chief Executive of the Singapore International Chamber of Commerce, said: “Cashflow is the lifeblood of every business especially for every SME at a time of economic crisis.”
“The best way we in the business community can help one another is to pay invoices promptly. I call on all businesses to take the pledge and action it now.”
Industry experts say the COVID-19 crisis is putting pressure on the cash flow of SMEs like never before. Monthly overheads are due within 30 days, but large companies often pay only after 60 days, or longer. According to PwC’s 2019 Working Capital Report, companies in Asia take around 70 days to pay their invoices.